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January in the Markets

Brexit has once again been the central concern for the pound. Dovish reactions from everyone from the US Fed to Bundesbank head Weidmann have been a theme throughout, but global equities have remained resilient.

Despite all the concern Sterling posted the sharpest gain for a year this January – reflecting a growing sentiment that a no-deal Brexit can, and will, be avoided. To give you an overview of the month we have brought together articles from the sector:

Bank of England Reports Published in January 2019

Credit Conditions Survey – 2018 Q4 – Read the report

This quarterly survey of banks and building societies is aimed at improving the understanding of trends and developments in credit conditions.

UK International Reserves – December 2018 – Read the report

The Bank of England manages the UK’s official reserves on behalf of the Government. They publish data on UK holdings of international reserves and foreign currency liquidity once a month.

Seven awkward questions – speech by Sam Woods – Read the transcript

Sam Wood spoke at a panel to celebrate the fifth anniversary of the Prudential Regulation Authority’s (PRA) Secondary Competition Objective (SCO). He explained that, in his view, the SCO has had a profound impact on the PRA’s activities. He said that the PRA has done a lot over the past years but, as we enter the second five years, we should start a debate about the next set of difficult questions.

Is There a “January Effect” in Forex?

From: Daily Forex

US Pundits talk about a “January Effect” on the stock markets, suggesting that either stock markets tend to rise in January, or that the year price change of stock markets tend to follow the January trends. In this article Daily Forex examine whether a similar effect might take place in the Forex market.

They conclude that both have shown a tendency to rise during the month of January, and for January’s performance to drive the rest of the calendar year. However, what really stands out is that both the U.S. stock market and the U.S. dollar have shown clear tendencies to rise during the month of January.

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German Economic Growth Slowest for Five Years

From: The BBC

The latest official figures show that Germany’s economy grew at its slowest rate since 2013 last year. A weaker global economy and problems in the car industry, caused by new pollution standards, have been cited as contributing to the slowdown.

Growth was 2.2% in 2017 and at the start of 2018 it had been expected to grow by 1.8%, but Europe’s largest economy showed growth of only 1.5%.

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Pound Sterling Rises Amid Stimulus Hopes After Worst 2-week Drop Since 2009

From: The Independent

Despite ups and downs in January, the Independent reports that the pound rose overall, rallying from its biggest two-week drop in more than seven years after UK authorities flagged measures to mitigate the impact on the economy of the vote to leave the European Union.

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Trade Deal Hopes Grow as US Treasury Secretary ‘Considers Lifting China Tariffs’

From: Bloomberg

Bloomberg reports that the Trump administration is pushing for a way to make sure China delivers on its commitments in any deal the two nations reach on the ongoing trade war. The U.S. wrapped up three days of mid-level talks with China in Beijing on Wednesday, noting a commitment by President Xi Jinping’s government to buy more U.S. agricultural goods, energy and manufactured products.

In a statement Wednesday, the office of U.S. Trade Representative Robert Lighthizer said it wants any deal to include “ongoing verification and effective enforcement.” Stocks rose globally after the two economic powers appeared closer to an agreement.

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UK Inflation Falls to Lowest Level in Nearly Two Years

From: The BBC

The UK inflation rate fell to 2.1% in December, from 2.3% in November, according to the Office for National Statistics. The Consumer Prices Index figure was the lowest in nearly two years, pushed down by petrol price falls.

The inflation reading was in line with analysts’ expectations and the figure is close to the Bank of England’s target of 2%. This may mean the Bank is less likely to consider any rate rises soon.

Inflation is being outstripped by average UK pay growth, the most recent available figures show that wages excluding bonuses were up by 3.3%.

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FX Rates in January

GBP/EUR

January GBP vs EUR Currency Fluctuations

Jan High: 1.1582
Jan Low: 1.1033
Jan End: 1.1415

GBP/USD

January GBP vs USD Currency Fluctuations

Jan High: 1.3183
Jan Low: 1.2546
Jan End: 1.3128

EUR/USD

January EUR vs USD Currency Fluctuations

Jan High: 1.1552
Jan Low: 1.1317
Jan End: 1.1495